SYDNEY (Reuters) – Australia’s Labor government will unveil its first budget on Tuesday as economic growth slows both at home and abroad, emphasizing its spending will focus on easing the cost-of-living crisis without lighting a fire under already high inflation.
Keen to avoid Britain’s recent mini-budget debacle, Treasurer Jim Chalmers has said officials have worked to ensure fiscal and monetary policies are aligned in the budget to support the Reserve Bank of Australia’s fight against soaring inflation.
In an interview with ABC Radio Brisbane on Monday, Chalmers reiterated that fiscal prudence will underpin its spending plans.
“There will be cost-of-living relief in the budget, but it will be pretty responsible, pretty restrained and the best way to provide that cost-of-living relief is to do it in a way that’s got other advantages for the economy,” he told the radio station.
“And that’s how you do it without making this inflation problem that we’ve got in the economy even worse by pushing up prices even further.”
Chalmers warned recently that a slowing global economy, in particular the sputtering Chinese property sector, will hit growth in Australia which is enjoying its lowest unemployment rate since the 1970s.
Domestically, the slackening growth also reflects the worldwide phenomenon of sky-high inflation rates, which have cut into household spending and overall consumption.
Budget papers are set to show gross domestic product (GDP) growth for the fiscal year ending June 30, 2024 will be downgraded to 1.5% from the 2.5% forecast in April. GDP growth is also due to be downgraded to 3.25% from 3.5% for 2022-2023, according to draft figures from the Treasury on Monday.
The budget will have some substantial measures around childcare, paid parental leave and wage growth, Chalmers said in the ABC Radio interview.
The budget deficit will be much smaller than first feared thanks to high prices for many of Australia’s major commodity exports and a surprisingly strong labour market.
Analysts are tipping the 2022/23 deficit will range from A$25 billion to A$45 billion, or around 1-1.5% of gross domestic product and relatively frugal by international standards.
(Reporting by Stella Qiu; Editing by Shri Navaratnam)
